California's housing market is not as fast and furious

By Rose Meily, for Silicon Valley Community Newspapers

Posted:
06/25/2014 06:04:41 PM PDT

Updated:
06/25/2014 06:04:43 PM PDT

As California's housing market continued its struggle with low inventory, home sales eased slightly in May and the median home price continued to rise above that of the previous year, according to the California Association of Realtors.

The state Realtor group reports closed escrow sales of existing, single-family detached homes in California totaled 391,030 units in May, marking the seventh straight month that sales were below the 400,000 level and the 10th straight decline on a year-over-year basis. Sales in May were down 0.6 percent from a revised 393,480 in April and down 9.5 percent from a revised 432,140 in May 2013.

Meanwhile, for the third consecutive month the statewide median price of an existing, single-family detached home rose both month-to-month and year-to-year. May's median price of $465,960 increased 3.7 percent from April's median of $449,360 and was up 11.7 percent from the revised $417,140 median recorded in May 2013.The statewide median home price has increased year over year for the previous 27 months.

Kevin Brown, president of the state Realtor group, sees the market transitioning to a slower pace for sales and less upward pressure on prices. "Generally speaking, buyers are feeling less urgency to buy as affordability has become more of an issue and lending standards continue to remain tight," said Brown.

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This appears to be the case even in the San Francisco Bay Area, which has been leading the housing market recovery in the state. Compared to May last year, sales lagged in all but one county in the nine-county region. Contra Costa County saw a year-to-year increase of 25.7 percent in single-family home sales, while the rest of the region saw slight to double-digit declines in year-to-year sales. Single-family home sales were down 14.6 percent in San Mateo County and down 5.9 percent in Santa Clara County. Month-to-month sales increased 5 percent in Santa Clara County and were down 0.2 percent in San Mateo County.

The overall month-to-month change in the Bay Area's median price was just 0.1 percent, with median prices in Napa and San Mateo counties rising by as much as 15.3 percent and 12.9 percent, respectively. Santa Clara County's May median of $875,580 was down 2.7 percent from the previous month and 6.1 percent higher than the May 2013 median of $824,960.

"The market is not as fast and furious as it was last year, but I don't view the changes as alarming or cause for concern. The market appears to be adjusting. The market cannot support the fast-paced price increases, and understandably, buyers are stepping back, even if interest rates are still reasonable," explained David Tonna, president of the Silicon Valley Association of Realtors.

Mortgage rates fell in May, with the 30-year, fixed-mortgage interest rate averaging 4.19 percent, down from 4.34 percent in April but up from 3.54 percent in May 2013, according to Freddie Mac. Adjustable-mortgage interest rates in May averaged 2.43 percent, down from 2.44 in April and down from 2.55 percent in May 2013.

The shortage of homes and housing affordability concerns are holding back would-be home buyers, said California Association of Realtors vice president and chief economist Leslie Appleton-Young. "While home price increases have tempered over the past few months, prices are still nearly 12 percent higher than a year ago, which is presenting affordability challenges to home buyers," said Appleton-Young. "Though housing inventory is up from last year, it's still half of what is considered normal, with some of it being overpriced. A tempering in home price increases and the recent drop in mortgage rates, however, should help spark the market in the upcoming months."